If prices fall to be equal to minimum ATC the firm:

Question

Quizplus · Accepted Answer

If prices fall to be equal to minimum ATC, the firm will not be able to cover its variable costs, let alone its fixed costs. However, under a super tax regime, the government may provide subsidies or tax breaks to encourage the firm to continue production. Therefore, the firm will continue to produce in the short run, and if the subsidies or tax breaks are sufficient, the firm may continue to produce in the long run.

If Prices Fall to Be Equal to Minimum ATC the Firm